On Aug. 17, 2006, President Bush signed into law new tax incentives for charitable gifts from donors who are 70½ or older. The Pension Protection Act of 2006 encourages financial support of charitable organizations across the United States.

Under the law, you can make a lifetime gift using funds from your individual retirement account (IRA) without undesirable tax effects. Previously you would have had to report any amount taken from your IRA as taxable income, then take a charitable deduction for the gift, but only up to 50 percent of your adjusted gross income. In effect, this caused some donors to pay more in income taxes than if they didn’t make a gift at all.

Fortunately, now these IRA gifts can be accomplished simply and without tax complications. Plus, you can make the gift now—while you are living and able to witness the benefits of your generosity.

You may contribute funds this way if:

• You are age 70½ or older

• The gift is $100,000 or less each year

• You make the gift on or before Dec. 31, 2007

• You transfer funds directly from an IRA or Rollover IRA

• You transfer the gift outright to one or more public charities, but not supporting organizations or donor advised funds

How the New Law Works

George, aged 73, has $450,000 in an IRA and has pledged to give $75,000 this year. If George transfers $75,000 from the IRA, he will avoid paying income tax on that amount. However, He cannot claim a charitable deduction - it is a pure “wash.” George has discovered the benefits charity without any tax complications. If he so desired, George could give more than $100,000. The legislation allows a maximum $100,000 gift in both the 2006 tax year and agian in 2007. So George could give $100,000 each year. If his spouse has an IRA and is 70½ or older, she too can also give up to $100,000 each year.

How to Make a Gift

Prior to making a gift, contact us at the The Delta Chi Educational Foundation or the disired charity to ensure that they are an eligible organization. Once you have received this confirmation and any special instructions, contact your IRA custodian to transfer your desired amount.

It is wise to consult tax professionals if you are contemplating a gift under the new law. Please feel free to call Bob Hendershot at (812) 343-1317 or fdnstaff@dcef.com with any questions.